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April Natural Gas Called Lower Following Warm Forecast Changes, Loose Storage

The outlook for the six- to 10-day (March 14-18) “carries some warmer themes compared to Thursday’s across the eastern half in the latter part of the period,” Radiant Solutions said in a morning note to clients. “High pressure promotes belows/much belows across the eastern half at the onset, while warmth is seen across the Interior West.

“That warmth looks to progress eastward as a Pacific trough pushes inland, promoting a ridge downstream that aims to bring widespread above-normal temperatures to the Midcontinent mid-period,” Radiant said. “As the pattern continues to press eastward, above-normal temperatures advance into the East late while warmth fades in the Midcontinent.”  

Bespoke Weather Services said the 15-day outlook still shows “solidly above average” heating demand but with recent warmer trends affecting confidence in that demand.

“Natural gas prices are down modestly again this morning as we continue to see losses worst at the front of the strip,” Bespoke said. “Thursday’s loose Energy Information Administration (EIA) print appeared to add a ceiling for prices and indicate that the steady grind higher needed to at least take a pause, with cash prices pulling back in tandem with the rest of the strip.”

The 57 Bcf storage withdrawal reported Thursday was in line with market expectations “but also implies the market has moved closer to balance on a weather-adjusted basis” at less than 1 Bcf/d undersupplied, analysts with Tudor, Pickering, Holt & Co. (TPH) said in a note Friday. Early estimates for next week’s report “show this trend to reverse as storage estimates (92 Bcf draw) are in line with norms (95 Bcf draw), even though warmer than normal weather is expected” at 145 heating degree days (HDD) versus 190 HDD norms “as the East Coast’s extreme weather likely obfuscates correlations.”

The TPH analysts “expect prolonged weakness in U.S. natural gas production (down 500 MMcf/d week/week)” and continued volatility in liquefied natural gas (LNG) exports volumes, down around 0.45 Bcf/d week/week. The LNG volatility “should come as no surprise” as Dominion’s Cove Point LNG terminal continues to ramp operations.

After gaining some momentum earlier in the week on consecutive daily gains, the prompt month has dropped close to a nickel since Thursday.

“I thought that after the last two days of trading the bulls might have the momentum necessary to get through $2.774-2.797-2.823. They did not,” said ICAP Technical Analysis analyst Brian LaRose following Thursday’s action. “That leaves natural gas sitting in an extremely vulnerable position as further weakness could easily shift the intraday technicals in favor of the bears.

“The bulls need to avoid this at all costs,” he said. “If they cannot, they risk losing control, and that could mean the end of this run.”

April crude oil was set to open about 56 cents higher at around $60.68/bbl, while April RBOB gasoline was trading about 1.5 cents higher at around $1.8828/gal.

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